A preference for land over sea among China's elite

Posted: 4th Apr 2013 | Written By: Wei Gu, The Wall Street Journal

China may have become the world’s largest market for luxury goods, but when it comes to buying private boats, most of its wealthiest citizens have yet to dip their toes in the water. Only one out of every 318 high-net-worth individuals in mainland China owns a yacht, versus one out of every 25 in Hong Kong, according to the Italian Trade Commission.

But the interest is there. A survey by Shanghai-based research firm Hurun found that more than half of mainland Chinese worth $1.5 million or more expressed interest in becoming a yacht owner. Meanwhile, companies are betting on growing domestic demand. Take Shandong Heavy Industry Group-Weichai Group, which last year bought a controlling stake in the Italian luxury yacht company Ferretti Group.

Ferretti subsidiary CRN is currently showing a 35-meter-long yacht at Hainan Rendez-Vous, a China boating festival attended this year by more than 300 global brands. The company’s president, Lamberto Tacoli, spoke to the Journal about what’s keeping wealthy Chinese from sailing out to sea on their own private boats. Hint: It’s not money.

Below are edited excerpts.

The Wall Street Journal: How does Hainan compare to boating festivals in other countries?

Mr. Tacoli: I think it is an important event because it is the main event in China. The problem of Hainan is there are so many things on sale: In addition to yachts there are also jets and jewelry. Now there are at least four or five boating festivals in Asia, that’s too much. Italy was the same before, every town wants a boating festival. I think we should have two for each continent, [but] even so that means we have to go out almost every month if we want to attend all of them. Believe me, we need time to build as well.

What has kept China’s wealthy from buying yachts for personal use?

We have sold just one yacht in China, and we sold it to a Hong Kong customer. In China we need a lot of authorization, just like we are moving a military ship. It is an attack on privacy and freedom. Last year we wanted to take some potential customers in Hainan for a short trip, and we had to get the names of passengers and their passports way in advance.

The other problem is lack of services and expertise in China, like captains and chefs. The marinas are also often not in luxury locations. They have to park among fishing boats, and they are far away from shopping areas or high-end hotels.

Asians are not so keen on the seas, unlike the Mediterraneans. They like to go out with umbrellas to protect them from the sun. Culture changes will happen only step by step. Our mission is to help change the culture, and help people enjoy the sea.

What are the most promising markets, in your view?

Africa is a hot area now. We see strong demand from Angola, Nigeria and South Africa. We think in about 10 years, Africa will become the new China. Malaysia and Singapore in Asia are also going well. We are also hopeful about markets in Hong Kong, Zhuhai and Shenzhen. When dealing with China, you need to be patient, spend the time and wait for the results.